Stamp Duty Relief for Startups: Hong Kong’s Hidden Property Tax Benefits

Key Facts: Hong Kong Stamp Duty Relief for Startups

Stock Transfer Rate: 0.2% of consideration (reduced from 0.26% in November 2023)
Property Stamp Duty: Progressive rates from HK$100 (properties up to HK$4 million) to 4.25% (above HK$20 million) – effective February 26, 2025
Section 45 Intra-Group Relief: Available for transfers between associated bodies corporate with 90%+ ownership via issued share capital
2025 Court Ruling: LLPs and entities without issued share capital excluded from Section 45 relief (John Wiley case, June 16, 2025)
Startup Tax Benefits: Two-tier profits tax at 8.25% on first HK$2 million, then 16.5% thereafter
R&D Tax Deductions: 300% on first HK$2 million, 200% thereafter for qualifying expenditure

Understanding Hong Kong’s Stamp Duty Relief for Startups

Hong Kong levies stamp duty on specific transactions, primarily those involving immovable property and shares in Hong Kong companies. For startups and growing businesses, these costs can represent a significant financial burden. However, the Stamp Duty Ordinance (Cap. 117) provides various relief mechanisms and exemptions that can substantially reduce operational costs during critical business activities such as corporate restructuring, intra-group transfers, and asset consolidation.

The impact of stamp duty relief on startup operational costs is considerable. By potentially reducing or eliminating stamp duty on necessary property or asset transfers, startups can preserve valuable working capital for reinvestment in core business functions such as product development, marketing initiatives, and talent acquisition.

Current Stamp Duty Rates in Hong Kong (2025)

Stock Transfer Stamp Duty

Stamp duty is charged on the transfer of Hong Kong stock by way of sale and purchase at 0.2% of the consideration (or market value if higher) per transaction. This rate was reduced from 0.26% on November 17, 2023. Hong Kong stock is defined as stock whose transfer must be registered in Hong Kong SAR.

The 0.2% duty is split equally between buyer and seller (0.1% each). For stock transfers, an agent typically handles the payment. If no agent is involved, both buyer and seller must pay their respective portions directly.

Property Stamp Duty (Ad Valorem Stamp Duty – AVD)

Following the 2025-26 Budget announcement, significant changes were made to property stamp duty rates, effective from 11 am on February 26, 2025. The Stamp Duty (Amendment) Ordinance 2025 was gazetted on May 16, 2025, with retrospective effect.

Property Value (HK$)	Stamp Duty Rate (Scale 2)
Up to 4,000,000	HK$100
4,000,001 – 6,720,000	1.5%
6,720,001 – 10,080,000	2.25%
10,080,001 – 20,000,000	3%
Above 20,000,000	4.25%

Note: Marginal relief applies to certain transactions. The government estimates that approximately 15% of property transactions benefit from these adjusted rates.

Lease/Rental Agreement Stamp Duty

Stamp duty on rental agreements varies by lease term:

Lease for 1 year or less: 0.25% of total rent
Lease for 1-3 years: 0.5% of total rent
Lease for more than 3 years: 1% of total rent

Section 45 Intra-Group Relief: The Primary Startup Benefit

Section 45 of the Stamp Duty Ordinance provides the most significant stamp duty relief mechanism for startups engaged in corporate restructuring and intra-group transfers. Subject to specific conditions, this provision exempts transfers of Hong Kong stock and immovable property between associated bodies corporate from stamp duty.

Definition of Associated Bodies Corporate

Two bodies corporate are considered “associated” under Section 45 when:

Parent-Subsidiary Relationship: One body corporate is the beneficial owner of not less than 90% of the issued share capital of the other; OR
Common Parent Relationship: A third body corporate is the beneficial owner of not less than 90% of the issued share capital of both bodies corporate

Critical 2025 Court Ruling: Impact on Hybrid Entities

On June 16, 2025, the Hong Kong Court of Final Appeal (CFA) delivered a landmark judgment in John Wiley & Sons UK2 LLP and Wiley International LLC v The Collector of Stamp Revenue. This decision has significant implications for startups using non-traditional corporate structures.

Key Holdings:

Section 45 relief is only available to bodies corporate with issued share capital
UK Limited Liability Partnerships (LLPs) do not have “issued share capital” in its ordinary meaning and therefore fall outside the scope of Section 45 relief
The term “issued share capital” should be interpreted according to its natural and ordinary meaning in company law, not an expanded interpretation
This interpretation applies regardless of whether foreign or domestic entities are involved

Affected Entity Types:

UK Limited Liability Partnerships (LLPs)
US Limited Liability Companies (LLCs)
Dutch Cooperatives
Other hybrid entities with interests or units similar to, but not technically constituting, share capital

IRD Clarification Post-Judgment: The Inland Revenue Department has indicated that an LLP or company without issued share capital can still be the parent entity that holds a company with issued share capital for stamp duty intra-group transfer relief purposes. This provides some planning flexibility for group structures.

Current Status: The Stamp Office has placed on hold all Section 45 relief applications involving hybrid entities and is reviewing its assessing practice in accordance with the CFA’s decision.

Eligibility Requirements for Section 45 Relief

Requirement	Details
Corporate Structure	Both transferor and transferee must be bodies corporate with issued share capital
Ownership Threshold	90% or more beneficial ownership of issued share capital
Ownership Duration	The 90% association must exist at the time of transfer
Holding Period Post-Transfer	The association must be maintained for at least 2 years after the transfer
No Avoidance Purpose	Transfer must not be part of arrangements for selling or disposing of assets to non-associated parties (Sections 45(4) and 45(5))
Genuine Business Purpose	Must demonstrate genuine business operations, not merely tax planning

Application Process for Section 45 Relief

The application process requires submission of comprehensive documentation to the Inland Revenue Department’s Stamp Office to substantiate the claim for exemption. Accuracy and completeness are critical to avoid delays or rejection.

Step-by-Step Application Procedure:

Prepare Required Documents:
- Original instrument of transfer (agreement for sale, conveyance, or transfer deed)
- Certified organizational charts showing corporate structure
- Shareholder registers and share certificates evidencing 90%+ ownership
- Certificate of incorporation for all relevant entities
- Statutory declaration by company secretary or director
Complete Statutory Declaration:
- Must be made by company secretary or director of parent company
- Declare beneficial ownership of not less than 90% of issued share capital
- Confirm intention to maintain associated relationship for minimum 2 years
- Declare transaction was not executed in connection with arrangements described in Sections 45(4) or 45(5)
- Made under the Oaths and Declarations Ordinance (Cap. 11)
Submit Application to Stamp Office:
- Submit complete application package to IRD Stamp Office
- Reference form IRSD124 (Stamping Procedures and Explanatory Notes on “Intra Group Relief”)
- Include all supporting documentation
IRD Review and Assessment:
- Stamp Office reviews application for compliance with Section 45 requirements
- May request additional information or clarification
- Processing time varies depending on complexity
Approval and Stamping:
- Upon approval, instrument is stamped with relief notation
- Stamped document serves as proof of exemption
- Maintain records for potential future audit

Professional Assistance: Many startups engage tax advisors or professional service firms for:

Eligibility assessment and transaction structuring
Preparation of required documentation
Coordination with IRD and handling inquiries
Ensuring compliance with post-transfer holding requirements

Other Stamp Duty Exemptions and Concessions

Stock Borrowing and Lending Relief

Certain stock borrowing and lending transactions may qualify for stamp duty exemption under specified conditions, primarily benefiting market makers and financial institutions rather than typical startups.

Islamic Bond Scheme Relief

The Islamic Bond Scheme provides stamp duty relief for qualifying sukuk (Islamic bonds) and related arrangements to promote Islamic finance in Hong Kong.

REIT and ETF Exemptions (December 2024)

On December 11, 2024, the Legislative Council passed amendments providing:

REIT Exemption: Transfer of Real Estate Investment Trust (REIT) shares or units are exempt from stamp duty
Options Market Maker Exemption: Options market makers are exempt from the HK$5 stamp duty per transaction document
ETF Exemption: All Exchange Traded Funds (ETFs) listed in Hong Kong have been exempt from stamp duty since 2015

Broader Tax Benefits for Hong Kong Startups

Beyond stamp duty relief, Hong Kong offers a comprehensive tax ecosystem designed to support startups and SMEs:

Two-Tier Profits Tax System

Hong Kong’s two-tier profits tax system provides significant tax savings for startups:

First HK$2 million of assessable profits: Taxed at 8.25%
Assessable profits above HK$2 million: Taxed at standard 16.5% rate
Available on a group basis (one entity per group)
Helps new companies preserve capital for reinvestment in growth and innovation

Territorial Tax System

Hong Kong operates a territorial taxation system with significant advantages:

Only profits arising in or derived from Hong Kong are taxable
No tax on dividends received
No capital gains tax
No withholding tax on dividends paid
No Value Added Tax (VAT) system

Enhanced R&D Tax Deductions

Since April 2018, companies engaged in qualifying research and development activities can claim enhanced tax deductions:

Expenditure Type	Deduction Rate	Cap
Type A (Payments to designated institutions)	100% (basic deduction)	No cap
Type B (In-house R&D)	300% on first HK$2 million	First HK$2 million
Type B (In-house R&D)	200% on remainder	Unlimited

Patent Box Regime (Introduced 2024)

Hong Kong’s Patent Box Regime offers preferential tax treatment for qualifying intellectual property income:

Preferential Tax Rate: 5% (versus standard 16.5% rate)
Qualifying IP: Patents, copyrighted software, plant variety rights
Requirements: IP must be developed or commercialized in Hong Kong
Nexus Approach: Only the portion of profits linked to qualified R&D (nexus ratio) qualifies

Government Funding and Grants

Beyond tax incentives, Hong Kong provides 45 funding schemes across various industries:

Enterprise Support Scheme (ESS): Matching funds for business development
Enterprise Marketing Fund (EMF): Reimbursements for marketing initiatives
Innovation and Technology Fund (ITF): Significant funding for large-scale R&D projects
SME ReachOut Service: Assistance in identifying eligible schemes and application support

Important Considerations for Startups

Offshore Entity Qualification

Stamp duty relief mechanisms for startups are generally focused on fostering local economic activity and genuine business operations within Hong Kong. An offshore entity with only a nominal presence in Hong Kong may not automatically qualify for property-related stamp duty exemptions. The regulations differentiate between genuine local establishments and structures primarily set up for tax advantages without substantive operations.

Corporate Structure Planning

Given the June 2025 CFA ruling, startups should carefully consider their corporate structure:

Ensure entities involved in potential intra-group transfers have issued share capital
Consider restructuring LLPs, LLCs, and other hybrid entities into traditional corporate forms if stamp duty relief is important
Consult tax advisors before implementing cross-border group structures
Document genuine business purposes for all restructuring activities

Post-Transfer Compliance

Startups that obtain Section 45 relief must maintain strict compliance:

Maintain the 90% association for minimum 2 years post-transfer
Avoid disposing of transferred assets to non-associated parties during holding period
Maintain comprehensive records demonstrating continued qualification
Notify IRD if circumstances change that affect eligibility
Be prepared for potential IRD audits or inquiries

2025 Global Tax Developments

Starting in 2025, Hong Kong multinational groups with global revenue of EUR 750 million or more may be subject to a 15% minimum effective tax rate under Pillar Two rules (OECD Global Anti-Base Erosion – GloBE). While this primarily affects larger corporations, high-growth startups should be aware of these requirements as they scale.

Practical Application Examples

Example 1: Qualifying Intra-Group Transfer

Scenario: HK Parent Co. Ltd. owns 100% of HK Subsidiary Co. Ltd. (both are companies with issued share capital). The subsidiary holds Hong Kong real property valued at HK$10 million that the parent wishes to consolidate.

Stamp Duty Without Relief: HK$10,000,000 × 3% = HK$300,000

With Section 45 Relief: HK$0 (if all conditions met and 2-year holding maintained)

Savings: HK$300,000

Example 2: Non-Qualifying Structure (Post-2025 Ruling)

Scenario: US LLC owns 100% interests in UK LLP, which owns Hong Kong property valued at HK$15 million. The US LLC wishes to directly hold the Hong Kong property.

Section 45 Relief: NOT AVAILABLE (UK LLP lacks issued share capital per June 2025 CFA ruling)

Stamp Duty Payable: HK$15,000,000 × 3% = HK$450,000

Alternative: Consider converting UK LLP to a corporate structure with issued share capital before transfer

Example 3: Share Transfer Between Associated Companies

Scenario: HK Holding Co. Ltd. owns 95% of both HK OpCo A Ltd. and HK OpCo B Ltd. OpCo A holds shares in a valuable Hong Kong company worth HK$20 million and transfers them to OpCo B for business reorganization.

Stamp Duty Without Relief: HK$20,000,000 × 0.2% = HK$40,000

With Section 45 Relief: HK$0 (common parent owns 95% of both, meeting 90% threshold)

Savings: HK$40,000

Key Takeaways

Section 45 intra-group relief offers the most substantial stamp duty savings for startups, potentially eliminating stamp duty on qualifying intra-group transfers of property and shares.
The June 2025 Court of Final Appeal ruling significantly restricts relief to entities with issued share capital, excluding LLPs, many LLCs, and similar hybrid structures.
Careful corporate structuring is essential – ensure all entities involved in potential transfers are bodies corporate with issued share capital to preserve stamp duty relief eligibility.
90% beneficial ownership must be maintained both at the time of transfer and for at least 2 years afterward to qualify for and retain Section 45 relief.
Offshore entities with only nominal Hong Kong presence may not qualify for property-related stamp duty exemptions – genuine local operations are required.
Comprehensive documentation is critical for successful relief applications – incomplete or inaccurate submissions lead to delays or rejections.
Beyond stamp duty, Hong Kong offers significant startup tax benefits including two-tier profits tax (8.25% on first HK$2 million), enhanced R&D deductions (up to 300%), and the 5% Patent Box regime.
Professional tax advice is highly recommended for complex group structures, cross-border arrangements, and to ensure full compliance with post-transfer requirements.
2025 rate reductions have made property transactions more affordable, with properties up to HK$4 million now attracting only HK$100 stamp duty (effective February 26, 2025).
Strategic planning combining stamp duty relief with broader tax incentives can significantly reduce startup operational costs and preserve capital for growth initiatives.

Disclaimer: This article provides general information about Hong Kong stamp duty relief for educational purposes only and does not constitute legal, tax, or professional advice. Stamp duty regulations are complex and subject to frequent changes. The June 2025 Court of Final Appeal ruling has significantly impacted eligibility criteria. Always consult with qualified tax advisors or legal professionals before making decisions regarding corporate structuring, property transfers, or stamp duty relief applications.

Last Updated: December 2025

Sources:

Tax.HK